Part of the credit for improving the lot of workers during this period certainly goes to the unions and left-wing parties, but Piketty's analysis seems to indicate that, at the same time, the world wars and the Great Depression would have had a mechanical effect on the level of inequality by mishandling capital.
For around forty years, inequality has been on the rise again and the achievements of the previous period are impugned. The inequality curve in the 20th century is U-shaped. At the start of the 21st century, it has returned to a high level.
For left-wing organizations, is this story one of success or not? Over the entire period, the result is mixed. If we look at the last half century, it looks downright bad. Since this period concerns us the most, the observation is one of failure. With growing inequality, contemporary history associates a political paradox which further demeans the performance of the left: since the class it is supposed to defend has suffered more serious attacks, we hear the left not more but less.
Here is a striking illustration of the powerlessness of the left: during the 1990s, several European summits were held, where eleven out of fifteen heads of government were social democrats. Such a preponderance would portend a bright future for the dominated class. However, the exact opposite happened. That many presided over coalition governments is, of course, an explanation but it does not contradict the diagnosis of great impotence nor does it deny the striking contrast between real influence and its appearance, which gives food for thought.
The current situation is due to a reversal which occurred a few decades ago to the disadvantage of the left and of which it was a helpless spectator. It corresponds to what has sometimes been called the conservative revolution, sometimes the conservative counter-revolution. The coming to power of Margaret Thatcher in Great Britain and Ronald Reagan in the United States triggered the neoliberal shock wave that spread throughout the Western world. Although it has since then lost its character as a rising wave, it nonetheless remains at work. The turnaround has affected society at three levels:
- - The economy: deregulation and free trade have liberalized it. The balance of power between social classes has evolved in favor of capital.
- Politics: not only have the left-wing parties seen their electoral weight decline, but their program has continued to retreat.
- Culture and ideology: while Marxism was becoming archaic, doctrines leaning towards liberalism conquered social thought, notably libertarianism in philosophy and the school of new classics in political economy.
Important historical phenomena rarely have a single cause. They are multiple here. Without claiming to be exhaustive, let us quote:
First, the slowdown in economic growth. Post-war reconstruction led to thirty years of growth, the high rates of which constitute a singularity in history. But it finally wore out in the mid-seventies, with the occurrence of the first serious recession of the post-war period, when inflation was at its peak. According to Piketty, it would simply be a return to normal growth rates. But since then, unemployment has tended to become endemic; even when it is confined, it marks the waged class with the stigma of austerity. Unemployment puts unions in a weak position, as well as public finances, which are very involved in social progress. The inability to maintain high growth and full employment represents a deficiency of capitalism that could have weakened it, but the pressure it exerted on those who had reason to challenge capitalism prevailed.
Second, rising production costs in rich countries and falling transport costs. They motivated economic elites to relocate production into low-wage countries. This development was reinforced by the wave of international free trade agreements, followed by liberalization of international movements of financial capital. The means of economic policy were weakened and tax evasion facilitated.
Let us return to the recent electoral decadence of the European left. The observation is even more painful if we note that since the beginning of the present century, one of the main beneficiaries has been the extreme right. In fact, in many countries, a significant part of the working-class electorate is migrating from the left to the far right. The far right is accomplishing this performance while historically, no government in which it has participated has ever applied a policy favorable to the working class. There has always been mutual understanding between these governments and the capitalist class. This was particularly the case with Nazism, despite what its early propaganda suggests. Nothing in the far right's social program should attract the disadvantaged groups of capitalism, a program on which its communication remains curiously discreet or vague. The electoral transfer is caused by the disconnection of gentrified social democracy from the working electorate. If so many ordinary people are receptive to the anti-migrant rhetoric of the far right, it is because they feel neglected (rightly), which gives them the impression that newcomers are treated better than them. Regularly in quite a few countries, social democracy forms a government coalition with the conservatives. In these conditions, the great asset of the extreme right is the formidable gift of social democracy: to be the main opposition force. Except in the rare cases where the extreme left is sufficiently influential, no longer any force politically opposes the domination of capital. The main left-wing party has deserted the fight, leaving the field open to an opposition which, whatever it says, adheres to the “system”. The far right continues to rail against “the system” but is careful not to specify what it is. As for its leaders, rarely in need, their address book are often filled with names belonging to the ruling class. Discreetly.
The left shows itself to be powerless and suffers electoral erosion while it defends a majority class. Such a paradox deserves an explanation commensurate with the observation. In my previous post “Voters Faced with Inequality: A Paradox”, I reviewed some current explanations. These causes are true and have actually worked but they cannot suffice. An alternative explanation is needed. The impotence of the left can be explained above all by the errors of many of its actors. The deficiencies of Marxism as an ideology are a piece of the problem. Many behaviors are faulty. I give here two examples:
- - the friendship of Western communists with the regimes which tyrannized the people of the Soviet Union and its satellite zone.
- The many cases of corruption, search for excessive personal advantages, misgovernment by representatives of social-democratic parties in various countries.
The responsibility for what I name a fiasco lies mainly with the left itself, both the parties and the intelligentsia. Does this mean that its leaders are incapable, incompetent? The simplism of this hypothesis is enough to disqualify it. What then is the cause which defeats normally competent people?
At this point, you should retort the question to me: and what do you think of the way in which right-wing organizations and parties are run? I must admit, my answer is: much less bad. Does this not confirm the diagnosis that I dispute, according to which the left is in the hands of unfit people? No, I am convinced that left or right, politicians have on average the same abilities, the same level of wisdom, with of course significant variations from one individual to another in the two camps. Whether left or right, political behavior has the qualities and defects of human actions that we always know to be imperfect. Now it is time to cross the threshold of my explanation.
Let’s start with a simple aphorism: “It’s harder to be on the left than on the right.” This is a sentence that is too easy to misunderstand. So let’s qualify it. The question is not whether it is easier to assume one of both positions than the other. My fundamental message is rather: “it is more difficult to be CREDIBLE AND EFFECTIVE on the left than to be CREDIBLE AND EFFECTIVE on the right.” In other words, the credibility traps are much more numerous on the left road, the obstacles to achieving objectives are immeasurably more colossal. This thesis deserves a demonstration.
The main difficulty concerns the implementation of reforms aimed at greater equity. I consider here only serious reforms, reforms which alter the distribution of the costs and benefits of the economy, reforms which are directly in line with the objective of a more equitable society. Basically, there is the difficulty of a government having to decide and implement reforms. But this primary difficulty falls on the shoulders of the parties which take part, because even before their accession to government, their attitude must show a wisdom at the height of their great ambition. Without this, you will not convince voters to give you the keys of government or, at least, you will not convince them to mandate you for more than just appearances.
To feel the difficulty at the government level, imagine a left-wing coalition that obtains parliamentary majority and gains access to government in country X, while the right governs its main trading country-partners. By assumption, all these economies are open. Let's assume that the new left-wing government does not just exist but actually works to modify the balance of power to the advantage of the disadvantaged classes. Its first measures raise the minimum wage, improve labor protection, increase the lowest social benefits and shift part of the burden of taxation from labor to capital. What is likely to happen? The competitive position of X's companies will deteriorate compared to their foreign competitors, causing them difficulties that they would have escaped if the competitors were subject to the same constraints. The aforementioned measures will probably stimulate consumption and thus economic activity, but it is mainly foreign exporters who will benefit thanks to their artificial competitive advantage. Transnational firms will abandon investment in country X. The rich of country X will be tempted to transfer their capital to more accommodating places or even to take up residence abroad. Part of their assets will undoubtedly end up in some tax haven. State X will borrow from foreign banks the sums compensating for the evaded taxes; the rating of its debt may be downgraded and the interest rate adjusted upwards. If the economy falters too much, the benefits the underclass derives from the new policy may be more than offset by the backlash; these people could therefore paradoxically join the camp of the discontented, stimulated by the cohorts of right-wing ideologues. The strongest point is that if all States had applied the same policy as X, none of this would have happened.
From this truth that in economics, the success of a policy depends less on its relevance than on the context governing international trade, let us look at a concrete case. The famous Hartz reforms, implemented by the Schröder government in Germany around 2003-2005, aimed to reduce the costs of labor and unemployment. A significant part of the German working class had to suffer a decline in purchasing power. This policy achieved its goal. The unemployment rate fell significantly and public finances recovered, at a time when these parameters were deteriorating among Germany's main partners. The German authorities convinced themselves that they had made the right choice in the face of which other European states would have been too cautious. In reality, the German economy recovered not because of this policy but because most other states did not apply it. With high consumption, these countries imported a lot from Germany where low costs reigned. On the other hand, Germany, in the grip of austerity, imported little from these countries. If all countries had implemented this policy simultaneously, anemic demand would have kept growth rates at the floor. This explains why when other countries began to copy German policy, they could not achieve the same success. Appearances are sometimes deceptive, which suits the ideologues of liberalism: a touch of bad faith allows them to blame the policy itself rather than the international context.
Two recent developments reinforce the difficulty of succeeding in a redistribution policy:
First: globalization. Almost all countries have become very dependent on international finance and trade. In addition to the natural cause of international trade, the differences in production costs between countries, a political cause has been added. Numerous bilateral and multilateral exchange agreements have been concluded. The World Trade Organization (WTO) was created in 1995 to manage international trade; most countries around the world take part. Its role as guardian of free trade gives it great influence. Free trade, formerly limited to products, has been extended to services and capital movements. In a majority of countries, the dependence on the global economy is such that it has serious political implications to which I will return shortly.
Second: European integration. The “Single Market” is completed and even crowned by a common currency. Enterprises in the European area are immersed in a very competitive environment. The same effects as those of globalization are taken to the extreme. However, there is a major difference: the European Union is allowed to legislate. At the same time as a space of competition, it establishes a space of co-regulation. If Europe unified tax, social and environmental rules, it would become a powerful factor of social progress, since the harmonization of legislation would free us from a burden: the distortions of competitiveness which handicap any decision costing to capital. But this advantage is so far virtual: European unification is not progressing in areas where it would favor employees. Tax and social harmonization are not among the objectives of the treaties. This lack in the treaties is not enough to prevent them, but progress will be more difficult.
Let us take a closer look at the impact of economic globalization on the domestic politics of the countries concerned. It is dramatic, because it is democracy that is suffering. Normally, democracy offers the people the sovereignty to choose the type of social relations governing the economy, provided - of course - respect for individual rights. This sovereignty is damaged, to say the least; the global market is able to sanction policies that it dislikes, as my example of the reforms decided in country X has shown. Economist Joseph Stiglitz describes this degradation of politics as follows:
“The capitulation to the dictates of financial markets is more general and more subtle. It does not only concern countries on the brink of collapse, but also all those who have to raise money on the capital markets. If the country in question does not do what the financial markets please, they threaten to lower its rating, withdraw their money, increase the interest rates on its loans; these threats are generally effective. Financial markets get what they want. There may be free elections, but the options presented to voters leave them with no real choice on the issues they most care about - economic problems.” (The Price of Inequality: my translation of the French translation).
Governments feel this occult power; to avoid coming into contact with it, they censor themselves, most often unconsciously. The elected power does not decide the measures that it fundamentally deems desirable but those that its place in international trade allows.
Concerned about their image, political leaders do not want to let this decline show. Deputies and ministers meet, discuss and decide as in the past, but especially when it comes to socio-economic matters, the exercise of political power has turned into theater. Some will consider this statement excessive. To understand that it is not, let us imagine three governments: the first finds the decisions imposed by globalization desirable. The second tries to favor social progress, but it will be sanctioned like country X in my example. The third, reluctantly, bends preemptively. All these nuances in behavior give the illusion of free will on the part of those who govern, but in all cases, the same law governs the lives of citizens. The comparison with the actors in a play is also imperfect because, habit becoming second nature, most politicians have lost awareness of this determinism and think they act autonomously.
Recent decades have demonstrated a public disaffection with politics, associated with the loss of credibility of democratic values in public opinion. Political scientists and commentators wonder about the cause of this paradoxical phenomenon which sees the system most profitable for the people, increasingly despised by these same people. The cause? It is at the heart of this reflection. Why would citizens be attached to a system that proves powerless? The resignation of those who govern leads to the despair of those who are governed. The community needs a mobilizing objective that affects each of its members; overthrowing the occult power of the world market could embody it, which would re-enchant politics.
These two phenomena, globalization and European integration, hit governments of the right as well as those of the left. But the effect is very different: dependence on abroad especially thwarts policies that cost to capital. At worst, the constraint of the global market affects the right-wing government in its ego. The economic management that it imposes on him should not displease him and it will suit the elite of his electorate. The mutilation of political power does not only produce losers. International competition puts pressure on wages and social benefits: few entrepreneurs will complain. Even the relocation of businesses to low-wage countries does not necessarily impoverish capitalists: capital often remains in the same hands as before the relocation.
Obviously, the ambition to reduce inequalities is a formidable challenge. And what has the left done most often? Ostrich-like behavior. The difficulty inherent in progressive policy has been glossed over from public debate. It is a big taboo. As they underestimate voters, politicians imagine that showing them the difficulties causes to lose their votes; they believe they are reassuring them by playing the superhero who completely controls the situation. Social-democracy, without recognizing it, has lowered its ambition below the threshold of difficulty; Extreme-left uses the “there is only to…” speech, which is completely devoid of credibility. These attitudes may seem childish, but given such an arduous ambition, they are understandable.
This denial is probably one of the reasons why left-wing parties have so much difficulty breaking through electorally. How can a party blind to the problems convince the voter that it will be up to its task after the election?
Despite all this, progressive politics is not a problem without solution. A later post will analyze the way out.